Biswap – a trusted DeFi platform, oriented on the best experience for users by providing them with decentralized exchange opportunities and revenue tools. We are constantly striving to develop the best DeFi ecosystem and are excited to reveal more details of the upcoming release of V3 AMM implementation. This is a significant milestone for Biswap, as it will bring new benefits for its users, including improved liquidity provision and a better trading experience. Our team has been working hard to present high-quality and profitable functionality for liquidity providers and traders, with competitive advantages and simple usage.
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Biswap has already accomplished a range of important releases, such as Perpetual Trading, a Multilingual Website, and a Biswap Blog. And now we are on the stage of great changes and opportunities. New AMM is a requirement of market trends and, more importantly, an effective solution for liquidity utilization. The upcoming release is an essential part of the Biswap roadmap and will entail a number of improvements for the project and elevate its positioning among DEXs on BNB Chain.
In this article, we want to disclose a core idea of Biswap AMM V3, its benefits, and future opportunities on the platform. More detailed information, guides, and documentation will be published along with the release. We encourage you to read this article to be aware of the fundamental changes and be ready for an early migration to V3.
Note that all provided screenshots are not actual, as AMM V3 didn't release yet. Take them as an example and illustration for better understanding.
What is AMM V3 on Biswap?
Automated Market Maker (AMM) is a fundamental aspect of the DEX structure that uses algorithms to provide automated trading on the platform within liquidity pools. Through the DEX's development, the AMM functionality changed as well.
Biswap DEX is ready for a crucial upgrade through the transition from AMM V2 to AMM V3. What is the difference between these two versions?
AMM V2 liquidity is distributed uniformly along the price curve between 0 and infinity. It means a significant liquidity share is rarely used, as most crypto assets usually trade within a certain price range.
In contrast, V3 allows Biswap Liquidity Providers to concentrate their capital on particular price intervals by setting a price range. If the determined range matches or intersects with the interval where most of the trading activity occurs, your liquidity will bring you up to 4000x more capital efficiency than V2.
Biswap V3 Benefits
The upcoming upgrade to AMM V3 is a necessary step for Biswap ecosystem development according to its strategy. V3 implementation will positively impact the Biswap platform, its users, and the entire DEX world.
- Effective liquidity distribution
- Reduced slippage and impermanent loss
- Increased TTV & TVL
- Increased number of investors, new users, and partners
- Development and expansion of the Biswap ecosystem
New V3 Era for Liquidity Providers on Biswap
Liquidity is a DEX’s oxygen, and Biswap made special efforts to create favorable conditions for Liquidity Providers. AMM V3 is about liquidity optimization that will lead to income maximization from liquidity supply. Take a look at the new opportunities.
- Liquidity providers will be able to scale up their capital efficiency by up to 4000x in comparison to AMM V2, thanks to concentrated liquidity.
- Liquidity providers will receive 80% LP (V3) rewards instead of 75% (V2). Moreover, future Biswap LP rewards will be 20% higher LP Rewards among V3 DEXs on BNB Smart Chain.
- Automatic participation in Farms without extra transactions will take less time and funds consuming relative to current Biswap Farms and other Farms on the market.
- Personal calculations of APR’s will be implemented within some time after AMM V3 release, so you will be able to see the individual share of profit from the pool instead of general APRs indicators like it was in V2.
- 80% yields from Limit orders. Once takers buy crypto through a Limit order, they will pay a trading fee. 80% of the trading fee will be allocated to Liquidity Providers, and the other 20% will go to the team.
Liquidity providers will get 80% LP (V3) rewards instead of 75% (V2). When users pay a trading fee, 80% would go to Liquidity Providers, 10% to the Team, and 10% to Treasury, a fund for future BSW lock and burn instruments. Moreover, Biswap V3 LP rewards will be 20% higher among V3 DEXs on BNB Smart Chain.
Concentrated Liquidity
Concentrated liquidity is a type of liquidity for a particular asset that is concentrated in a specific price range instead of being spread across various venues.
Such liquidity distribution will create a number of advantages for Biswap users. Liquidity providers will be able to increase their capital efficiency from deposited crypto. Impermanent loss in AMM V3 will be much lower in comparison to V2. Impermanent loss refers to the temporary loss experienced by liquidity providers when the value of their deposited assets diverges from the value of the same assets held outside the liquidity pool. By narrowing the price range, liquidity providers can minimize the exposure to impermanent loss, thereby preserving a greater portion of their capital. Of course, it depends on users' strategy, range size, and other factors. But the principle is that the more narrow the price range Liquidity Provider set, the less exposure to the impermanent loss! For traders, concentrated liquidity can result in enhanced trading processes with better fees and decreased slippage, even in pairs with relatively low trading volume.
Active liquidity
Active liquidity is liquidity that brings profit for Liquidity Providers once the set range matches or intersects the price diapason where most trades occur, resulting in higher capital efficiency and profitability.
#1 Example
You are providing liquidity in the BSW/USDT pair. Let's say the BSW price is 0.25 USDT. You have provided 1000 USDT and 4000 BSW (~$2000), then you have set a price range for BSW/USDT of +50% to -50%. It means you will receive a commission when the price ranges from 0.125 USDT/BSW to 0.375 USDT/BSW.
If, for instance, you want to lock the LP for 30 days, your APR will be 20%. You will earn rewards as long as the price stays within the specified price range.
Let's take the price fluctuation within the range of 0.2 to 0.3 in our example. In this case, as an LP provider, you will receive:
2000 * 20% (APR) * 1/12 = $33 in BSW and USDT tokens
- If the price goes beyond the set range, APR will not be accrued.
- If the price exceeds the upper limit (0.375 USDT/BSW), the position will only consist of USDT.
- If the price falls to the lower limit (0.125 USDT/BSW), the position will fully transition to the volatile asset — BSW.
- The narrower the range you set, the higher your APR becomes, as its liquidity is used much more effectively.
- For example, by setting a range of +100% and -100%, you will receive a 5% commission, and by selecting a price range of +10% to -10%, you will receive a commission of 256%.
- APR figures are conditional
Inactive Liquidity | Out of Range
Due to fluctuations, asset prices can move outside the range set by the Liquidity Provider. In these cases, the liquidity stops earning fees and becomes inactive. To start earning again, users have to rebalance the liquidity manually. It will be necessary to withdraw the inefficiency liquidity and provide it for an appropriate price range.
NFT LP Tokens
Once you become a liquidity Provider on V3, you will receive an NFT LP instead of LP tokens, which keeps all the data and generated fees of the provided liquidity. This NFT LP is a separate smart contract that proves your participation in the liquidity pool, but you don’t need to stake it in order to participate in V3 Farms.
Capital Efficiency
Capital efficiency is a broad term for how efficiently your investment operates and returns. AMM V3 aims to increase it. Liquidity Providers have strategic placement options to increase earnings through custom price ranges even up to 4000x relative to V2 for providing liquidity within a single 0.1% price range. Note that keeping liquidity active in such a precise range is possible in case of appropriating market conditions and other factors.
Custom Liquidity Ranges
AMM V3 allows Liquidity Providers to deploy their liquidity within their chosen price range and exert precise control over their invested capital. On Biswap V3 users can provide liquidity to a pair and set one or multiple price ranges. This way, they will apply their own strategy to earn from provided liquidity and create a liquidity pool for users to trade with. Each position is subject to a distinct and customizable set of parameters determining its value and rewards.
Multi-tier Fees & 80% LP Rewards
Biswap will offer several fee tiers for liquidity pairs, which we will analyze in detail below. Fees will be paid by users who make swaps. These fee tiers allow Liquidity Providers to select the pools according to the risk they are willing to take. When users swap within the commission that you set for your pool, you will get an 80% LP reward from it. The closer your range to the current price, the higher rewards you get.
Passive Income via V3 Farms
Once users provide liquidity and its range matches the current prices diapason, Liquidity Provider will automatically start earning from V3 Farms with no need to make extra transitions to activate it.
Benefit from V3 Farms | Low Network Fees & One-click Participation
Biswap V3 Farms is one of the most important advantages of AMM V3. Why is it beneficial?
- Automatic participation
- Personal APR's
- Easy migration
- Rewards in BSW
- Passive income
Once you become a liquidity Provider on V3, you don't have to pay a transaction fee and take extra actions to launch the Farm. As we mentioned before, there won't be a need to deposit LP tokens. Farms' activation will happen when the user provides liquidity and their range matches the current price range.
Migration from Farms
You will be able to migrate from Farms. It will be necessary to unstake your LP tokens from V2 Farms and transit the liquidity to V3.
Farm Profit Calculation
There will be 2 types of APRs that will represent your share of profit.
General APR is the APR calculated on the basis of the entire pool. This type of APRs will be shown immediately after the AMM V3 release.
Personal APR is an APR that is dynamically calculated according to the user’s range. This feature will be implemented in the next iteration since, for the development of this APR, more historical data and more positions are needed.
Liquidity Migration from V2 to V3 Protocol
After the new AMM implementation, a transition from V2 to V3 will take place. Biswap developed the most convenient, a few-click migration, making it simple and clear for everyone. We will provide you with a detailed guide after the release.
New V3 Experience for Traders
AMM V3 will ensure an enhanced trading experience for all Biswap users. It will be cheaper, more profitable, and more flexible! Limited orders, multiple fee tiers, regular swaps, and auto routes will result in greater revenue for traders.
Limit orders
Biswap AMM V3 will offer limit orders as a trading tool. A limit order allows traders to set a price to buy and sell cryptocurrencies. Only if the market price of your crypto reaches the limit price an order will be executed. For example, Kate wants to sell BNB, placing her position in the 300-310 USDT price range.
When the price exceeds the price range of 310 USDT per BNB, the limit order will be considered to have worked at an average price of approximately 305 USDT.
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